THE legendary Royal Flying Doctor Service, an icon of the Australian Outback, is in danger of having its wings clipped as it is forced to compete with commercial rivals.

For nearly 80 years, the RFDS has been a safety net for rural and remote Australia, flying in medical personnel, evacuating patients and conducting mobile clinics in isolated areas. The service is Australians' favourite charity, receiving the proceeds of many a school fete and jumble sale, its collection tins a familiar sight on pub counters.

Now the state governments which partly fund the not-for-profit organisation are reviewing its role in providing air ambulance services. In Victoria, it has already lost a $70m (€43m) contract to a commercial operator, Pel-Air Aviation, while the New South Wales government is considering rival bids for a contract worth nearly $100m.

In Queensland, the Flying Doctor's biggest division, it recently won a contract to expand operations but was forced to bid for work for the first time.

The decision to expose the RFDS to the chill wind of commercialism is a severe blow to its army of supporters and fundraisers. Stephen Knox, who organises an annual Outback car trek to raise funds, described it as "a slap in the face". A Queensland MP, Bruce Scott, implored the government not to "go down this path of economic rationalism".

The service – which inspir­ed a BBC radio series in the 1950s, The Flying Doctor, as well as a long-running TV series – was the world's first comprehensive aerial medical organisation, and still covers an area the size of western Europe.The former prime minister, Robert Menzies, said it represented the "greatest single contribution to the effective settlement of the far distant back country".

The RFDS argues that, stripped of its lucrative air ambulance contracts, it will find it harder to fund other services, such as flying in doctors and nurses to provide primary healthcare in remote communities.

Clyde Thomson, executive director of the southeast division, told The Australian newspaper: "The consequences [of losing the contracts] are significant. They're not fatal but … there will be ramifications."

However, Lim Kim Hai, chairman of Rex Air, which owns Pel-Air, said the contracts were only to provide aircraft and pilots. "There's no medical content," he said.

The Red Cross and St John Ambulance, also held in high public regard, have to compete for public funds.

Most Australians, though, believe the Flying Doctor – part of the lore and romance of the Outback – should be protected from commercial imperatives.